Report 2018-112 Recommendation 16 Responses

Report 2018-112: California Department of Veterans Affairs and Department of General Services: The Departments' Mismanagement of the Veterans Home Properties Has Not Served the Veterans' Best Interests and Has Been Detrimental to the State (Release Date: January 2019)

Recommendation #16 To: Veterans Affairs, Department of

To prevent unauthorized use of its property, CalVet should regularly monitor the use of the leased properties and take action to cease any activity that is not allowed by the terms of the lease agreements. Further, it should take action to cease the balloon launches from the golf course or amend its lease with the lessee to identify balloon launches as an approved use of the property.

Annual Follow-Up Agency Response From October 2021

CalVet's State Asset Manager has developed and published a Commercial Leases: Use Monitoring, Rent Tracking and Ensuring Veterans Homes Resident Benefits Policy 7912 v.1 on 10/24/20), which addresses the following:

1. The process for the monitoring of property usage and required permits, licenses, inspections and insurance

2. Management's role and oversight responsibility to discuss compliance and due dates of all entries in the Lease summary of the lease.

3. Physical site visits monthly.

4. The process for monitoring leases that are less than fair market value rent or no rent in-lieu of services and record retention.

5. Tracking of Leases that require Veterans Home Resident Benefits and the Resident Awareness of lease Benefit.

This process has strengthened the internal controls for monitoring the use of leased properties and to take action to cease any activity that is not allowed by the terms of the lease agreements.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

CalVet previously provided evidence that the hot air balloon launches at the golf course on the Yountville veterans home have ceased. CalVet also provided its new, formalized policy describing how its State Asset Manager will monitor activities on the leased properties, and documentation of site visits to monitor leased properties.

Annual Follow-Up Agency Response From October 2020

A documented set of procedures for the monitoring activity performed by CalVet's State Asset Manager is being developed. The formalized process will demonstrate the following:

1. How monitoring activities of lease properties are completed;

2. Actions taken to resolve any discrepancies encountered;

3. The communication to respective CalVet management on the monitoring activities completed, along with actions that are pending.

The process will strengthen the internal controls for leased space.

Documented Evidence:

CalVet's Home Resident Benefits and Monitoring of Commercially Leased Premises, draft policy 7913v1

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

CalVet provided evidence that the hot air balloon launches at the golf course on the Yountville veterans home have ceased. CalVet also provided a policy describing how its State Asset Manager will monitor activities on the leased properties, but stated that it has not yet fully implemented that policy. Until CalVet implements formalized procedures for monitoring activities at the veterans homes, the recommendation will not be fully implemented.

1-Year Agency Response

As mentioned in the six-month update, CalVet has taken steps to ensure activities and uses on its properties benefit the Veterans Homes and are in keeping with their purpose. Specifically, hot air balloon launches have been discontinued on CalVet property. The parties identified in the audit as lacking valid property use agreements have vacated. The Department has provided copies of the letters to these tenants and, separately from this submission, will provide a copy of the letter it sent regarding the balloon launches.

Further, the Department hired a State Asset Manager for the Veterans Home in Yountville. This employee maintains a strong line of communication with all tenants and a presence at their leased spaces. This employee engages in frequent communication with these tenants. This serves two purposes: to address needs that arise in the leased spaces, such as maintenance, and to ensure the Department maintains a strong understanding of the activities occurring in these locations and that they are operating in accordance with the Department's new property use policy.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

CalVet provided evidence that the hot air balloon launches at the golf course on the Yountville veterans home have ceased. CalVet also described a process that its State Asset Manager follows to monitor activities on the leased properties. However, CalVet has not yet formalized that process. Until CalVet develops formal procedures for monitoring activities at the veterans homes, the recommendation will not be fully implemented.

6-Month Agency Response

CalVet has taken steps to ensure activities and uses on its properties benefit the Veterans Homes and are in keeping with their purpose. Specifically, hot air balloon launches have been discontinued on CalVet property. The parties identified in the audit as lacking valid property use agreements have vacated. Further, the Department's policy maintains that licensed events that take place on the properties must significantly benefit the residents of the Veterans Homes and be conducive to the Homes' successful functioning as skilled nursing, assisted living, and independent living facilities.

California State Auditor's Assessment of 6-Month Status: Pending

CalVet has not yet provided evidence to support that it has fully implemented this recommendation.

60-Day Agency Response

CalVet agrees with and is implementing this recommendation. CalVet has notified the golf course that the balloon launches are not compliant with the lease and must be terminated by July 1, 2019. CalVet headquarters is now actively monitoring activities on leased properties and implementing appropriate corrective actions as necessary.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2018-112

Agency responses received are posted verbatim.